Paris 2011: What Will the F-35 Cost?

After the preliminary design review was completed on schedule in April 2003, every subsequent milestone in the F-35 program was missed by at least one year. Yet Lockheed Martin continued to exude optimism, rejecting criticism that production was being ramped up before development and producibility issues were solved. The company’s credibility having been dented, its predictions that the ultimate unit cost of the first stealthy international fighter jet could still be $60 million (F-35A CTOL version, 2010 dollars) are raising eyebrows­–especially when the cost has been contradicted by various U.S. government reports.

The Government Accountability Office (GAO) talks of a “near doubling” in average unit prices since the program began. When the F-35 program breached the Nunn-McCurdy Act 12 months ago, the Pentagon predicted to Congress an average unit production cost of $133 million in current dollars.

But the unit cost of an F-35 will vary greatly depending on sub-type, and whether it is contracted within the low-rate initial production (LRIP) Lots or the supposedly much more efficient multi-year buys (MYBs) that will follow. As things stand, however, the MYBs will not begin until fiscal year 2018, two years later than previously planned. So there will now be 11 LRIP buys.

Lockheed Martin said the ramp-up rate is the key to affordability. It is still planning for a peak production rate of 20 aircraft per month. But as the GAO noted, the F-35 program places unprecedented demands for funding–an average $11 billion per year for the next two decades–on a shrinking defense budget. The implication is that the U.S. will not be able to afford anything like the 2,443 aircraft that it currently plans to buy.

The 30 LRIP Lot 4 jets are the first to be contracted on a fixed-price-incentive-fee basis. When the separately contracted cost of the F135 engine is added ($15 million for the F-35A CTOL and F-35C CV engine, and $32 million for the F-35B STOVL engine), the unit cost comes to $126.6 million each for the 11 F-35As, S141.4 million each for the 17 F-35Bs and $157.9 million for the four F-35Cs.

Lockheed Martin will receive another $511 million for the logistics and sustainment of these aircraft, on a cost-reimbursable, not-to-exceed basis. The F-35 Joint Program Office said it cannot yet adequately identify and price risk to negotiate fixed-price contracts for support. Further, Lockheed Martin received a contract worth $820 million to prepare for increased production rates in future years, again on a cost-reimbursable, not-to-exceed basis.

Negotiations on logistics and sustainment packages continue and are a major focus for the JPO this year. The GAO now says “current F-35 life-cycle cost estimates are considerably higher than the legacy aircraft it will replace.”

Last year, the U.S. Navy predicted that total life-cycle costs for the F-35 program would exceed one trillion dollars.

How does Lockheed Martin react to that startling statistic? “That figure is based on all 2,443 planned aircraft for the U.S. flying for 52 years from more than 50 bases, using cost data derived from legacy aircraft in then-year dollars,” O’Bryan said.

“The F-35 is subject to more key performance parameters (KPPs) relating to sustainment than any other fighter jet,” he said. “For instance, after 200,000 fleet hours it must be twice as reliable as an F-16 or an F-18.”

F-35s Unit Cost Not the Whole Story

According to some observers, there is unquantifiable value in some of the avionics advances in the Lockheed-Martin F-35.

In a presentation at the Mitchell Centre for Airpower Studies last year, Barry Watts, Center for Strategic and Budgetary Assessment, said, “If you look at F-117 and B-2 missions, low observability doesn’t give you [total] invisibility to air defenses, particularly to radar-guided SAMs.

“Those routes [to the target], relative to the defenses that we were aware of, had to be carefully planned prior to the mission,” Watts continued. “This airplane’s going to be able to do that in real time [thanks to] the huge amount of computational power that’s available.”

In another presentation given at the same event, Lt. Gen. David Deptula, former U.S. Air Force Deputy Chief of Staff, A-2, stated, “With the ability to rapidly collect, analyze, transmit, display and share decision-quality information across a wide battlespace rapidly...we create...a value that becomes more important than individual unit cost.

“The F-35 can take a SAR [synthetic aperture radar] map down to a very fine degree, add that SAR image to its ground moving target indicator and display the difference between fixed and moving, land or maritime,” said Deptula. “This is something we have to do today with several separate aircraft and a ground station.”